25 Apr 2011 Electronic invoicing – what’s so important about Germany?

Those following developments on electronic invoicing will be very familiar with the news from earlier this year that the rules in Germany are about to be relaxed. From 1st July 2011 the technical requirements imposed on the use of electronic invoices in Germany will be abandoned. Great! But so what!

What’s so important about Germany? Let me explain why it’s important.

The significance of this is partly symbolic. The German interpretation of the various EU directives dealing with invoicing have been held up as an example of how complex e-invoicing can be. If you can get electronic invoicing to work in Germany, you can get it to work anywhere. A mixture of an over reactive bureaucratic approach to business process and a Teutonic attention detail led to  set of rules that made the implementation of electronic invoicing in Germany all but impossible.

The requirement for a qualified digital signature

The biggest blocker to electronic invoicing in Germany was the the qualified digital signature. This is surprisingly difficult to explain in an engaging or interesting way. Feel free therefore to skip the next paragraph.

A qualified digital signature is an advanced digital signature based on a certificate that is valid when the signature is created. The rules relating to the use of qualified digital signatures in Germany are laid out in the German Digital Signature Act. Qualified certificates certify that the signatory is authentic by confirming that the signatory is the owner of the public key. The critical part of the certification process is that the certificate may only be issued for “natural persons”. Although it is possible to authorize one or more “natural persons” within a company to sign for that company it is not possible for a company or legal entity to be issued with a certificate.

And it’s the “natural person” bit that causes the problem. If you want to implement an electronic invoicing program and get your top 1,000 German suppliers to send you XML invoices over the internet – it’s not the technical complexity that defeats you – it’s the fact that you have to get 1,000 CEOs off the golf course to sign something they don’t understand and you can’t explain.

Electronic Invoicing – what’s so important about Germany?

Germany isn’t the only country to have imposed complex regulations that have frustrated efforts to roll out e-invoicing but Germany’s relaxation of the rules is very significant indeed.

In terms of IMF GDP figures, the European Union is the largest economy in the world generating € $11,808 billion (2009)  and Germany has the biggest GDP by far at €2,409 billion.* So it’s not just of symbolic importance that German business will be able to free up resources and cash by eliminating paper from it business processes.

28 billion invoices are issued in Europe each year – in an economy that has enthusiastically embraced electronic transactions for payment – payment by check is rare in Europe – 95% of invoices are paper.**  This anomaly is about to evaporate.

The European Union is a complex market place. A single market with many languages and many independent and autonomous governments – it doesn’t even have a common currency thanks to the British. All member states are interdependent. Cross border trading within and outside of the EU are every day and essential economic transactions and the lack of unity on common business processes like invoicing represents a major cost to the European economy. The relaxation of regulation – not only in Germany – but all over Europe will act as an important economic boost.

So when Germany embraces electronic invoicing – that’s important – very important.